Global Trade Distribution Processes Used by Cadbury - Case Study Example

Global Trade Distribution Processes Used by Cadbury Introduction Cadbury is a British company that manufacture and sells a wide-range of confectioneries (i.e. Cadbury Dairy Milk, Cadbury Wispa, and Cadbury Twirl among others) (Cadbury 271). Basically, the business started in 1824 when John Cadbury decided to sell cocoa and chocolates in a small grocery store (Cadbury a). It was in 1831 when Cadbury opened its first ever chocolate factory in Crooked Lane (Bradley; Cadbury a). Because of its business success, Cadbury became “the world’s leading confectionery company” in 2003 (Cadbury a). In 2012, Cadbury became a part of the Mondelēz International (adbrands). Cadbury is known for having a strong global brand. To ensure that its target market will receive the product in good condition, it is crucial on the part of its global distribution manager to establish a strong distribution network within the global markets. Global Trade Distribution: The Case of Cadbury To be able to clearly understand the global trade distribution processes of Cadbury, it is best to learn more about its production or manufacturing line. In line with this, it is widely known that Cadbury operates its business in London Borough of Hillingdon in England (BusinessWire). In real business practice, Cadbury’s supply of cacao beans is coming directly from Ghana (Google Satellite Map) and Portuguese (Cadbury 177). After processing the cacao beans into 53% cacao and butter composition in Singapore, the semi-finished products are shipped to Cadbury’s four (4) factories in Australia and New Zealand (i.e. Melbourne, Victoria, Hobart Tasmania and Dunedin, New Zealand) (Google Satellite Map). On top of these four (4) major Cadbury’s manufacturing firms, this particular confectionary company also had a manufacturing plant in Kenya. Unfortunately, it was recently announced that that its Kenyan plant will be closed down by the end of October 2014 because of Mondelēz International’s decision to move the plant to Egypt (Nieburg). Cadbury’s strong brand is one of its most valuable assets (Keyon, Ng-Loy and Richardson 7). To create a strong brand, the top management of Cadbury had always been focused on keeping the quality of its chocolate products the highest as possible (Cadbury 102). In fact, this particular marketing strategy enabled Cadbury to effectively compete with other large-scale confectionary manufacturers such as the case of Nestlè, Hersey’s, Ferrero, and Mars (DePamphilis 91). In line with this, one of the main reasons why Cadbury decided to operate its manufacturing companies mostly in Australia is because of consumers’ trust in Australian-made products. (See Figure I – Distribution of Raw Materials to Cadbury’s Manufacturing Line on page 3) Figure I – Distribution of Raw Materials to Cadbury’s Manufacturing Line In general, the global distribution network of Cadbury is much larger as compared to other confectionary manufacturers like Kraft (Barrow 93). Often times, global distribution network can be made either through the use of foreign intermediaries or through direct channels (Lamb, Hair and McDaniel 395, 399; Perrigott and Herrbach). In the process of using the active participation of different foreign intermediaries, Lamb, Hair and McDaniel (399) explained that distribution managers could somehow free themselves from the risks of experiencing more trade barriers. In the case of Cadbury, this particular confectionary manufacturer is making use of different foreign intermediaries as a way to deliver its finished products to its intended market. Specifically the term ‘strategic channel alliances’ is all about the legal use of another company’s distribution channel (Lamb, Hair and McDaniel 385). In line with this, Cadbury became officially a part of the Mondelēz International back in 2012 (adbrands). For this reason, there is a strong possibility wherein Cadbury products are being transported through Mondelēz International’s strong global market routes in emerging markets such as Brazil, Russia, India, China, and Mexico (Mondelez International). To sell a wide-range of confectionary products, Cadbury decided to establish its seven (7) main retailers in different countries such as the United Kingdom, United States of America, Australia, Canada, Thane in India, Ireland, and New Zealand (Bradley; Cadbury 267; Google Satellite Map). It means that whatever Cadbury product line is manufactured in each of its four (4) major manufacturing firms in Australia and New Zealand, the corresponding manufacturing companies should distribute its finish products to the company’s seven (7) main retailers. Eventually, it is through these seven (7) major Cadbury’s retailers that will be authorized to distribute and sell its finished products to a total of 165 countries worldwide (Google Satellite Map). (See Figure II – Summary of Cadbury’s Global Distribution Network below) Figure II – Summary of Cadbury’s Global Distribution Network Specifically the global distribution of Cadbury was designed in a systematic way. Often times, geographic strategy plays a significant role in deciding where and how to transport Cadbury products to the pre-selected target markets worldwide. For instance, other than selling a wide-range of Cadbury products in Indian market, Cadbury’s major retailer in Thane, India is also the one that is responsible in exporting Cadbury products to other nearby countries such as Hong Kong, Singapore, Sri Lanka, and the Middle East (Cadbury 267). Since the weather in these countries is generally hot, retailers in tropical areas are required to provide air-conditioning in their chosen retailing outlets. Doing so will help the retailers preserve the quality of Cadbury’s chocolate products. The process of immediately expanding the business in foreign countries, without careful marketing study, entails a lot of risks. Therefore, other than considering the geographic boundaries of its target market, Cadbury also makes it a habit to test the market first before deciding to expand its business in a foreign country. For example, before Cadbury had finally penetrated the Russian market, this particular confectionary company decided to export some of its finished products to Russia (Cadbury 277). Immediately when the first batch of exported products were sold-out in Russian market, its marketing group started planning on how the company could regularly transport their products to this particular country. Having sold-out products in Russia strongly means that people who are currently living in this country are most likely to patronize Cadbury’s chocolate products. In fact, it is a very good sign that Cadbury will have more business opportunities in Russia. Related to study of global distribution and networking, the act of licensing or having a contractual agreement with a potential distributor is one of the most common business practices worldwide (Ross 702). Therefore, as soon as Cadbury had exported it products to Russia, these food items will go directly to its accredited distributor in Russia who then will be the one to deliver the products to each accredited wholesaler in each region. In relation to Cadbury’s consumer channel, it is the accredited wholesalers who would deliver Cadbury products to all potential distributors in the area (i.e. grocery store outlets and small-scale convenience stores). To help reach Cadbury’s target consumers, it is possible for each country to have few hundred accredited wholesalers more than 2,500 distributor nationwide. (See Figure III – Domestic Distribution Network of Cadbury Products below) Figure III – Domestic Distribution Network of Cadbury Products Discussion One should always keep in mind that the design of global distribution network can significantly affect the company’s ability to make their products available to their target end-consumers. In fact, the process of selecting the best global distribution channel or strategy is considered as one of the most serious considerations that all marketing managers should take. At all times, the global distribution channel or strategy used by any international company should be aligned with its promotional activities, product line, and pricing strategies (Lamb, Hair and McDaniel 385). Likewise, marketing managers should also consider the best options that will enable the company avoid too much trade barriers caused by political and legal issues in each foreign country strategies (i.e. duties and taxes, export/import regulatory restrictions, and local laws on proper product labelling and packaging among others) (Lamb, Hair and McDaniel 394; Ross 706). The issue on global distribution network is not limited to the structure or types of distribution network or strategies (i.e. direct or through the use of foreign intermediaries (Lamb, Hair and McDaniel 395, 399) but also the use of necessary warehousing and transportation resources, distribution channel control and monitoring, pricing, and terms of sale (Ross 705–706). Likewise, it is crucial on the part of global marketing managers to know that the structure of distribution channel in each country could vary from one another (Ross 705). As such, Ross (705) explained that the structure of global distribution network in each country is strongly affected by a long-list of economic, cultural, technological, social, political, and legal factors. For this reason, it is equally important on the part of the global marketing manager to be more flexible and make it a habit to conduct his own market research study before making important marketing decision needed when penetrating a foreign market. Because of the presence of different culture and the use of different languages, people who are working in global distribution should practice good leadership and communication skills at all times. Whatever decision that global distribution manager will make, the decision should always be based on how the company will be able to deliver its finished goods items straight to the customers using the shortest possible distribution network. By doing so, the global distribution manager can play an important role in terms of allowing the company to enjoy massive savings out of unnecessary cost of warehousing, distribution and too many personnel (Sreenivas and Srinivas). As a common knowledge, Cadbury’s various product lines are sensitive to high temperature. Therefore, it is important on the part of the distributor to preserve the quality of Cadbury’s products by maintaining a low temperature at all times. To avoid very long lead distribution time, the global distribution managers should make it a practice to consider the geographic situation of the company’s manufacturing plant and its target market. In line with this, the global distribution managers should make it a routine to schedule the distribution of finished goods straight from the nearest manufacturing plant. Basically, reduced time in the delivery of goods could mean increasing the efficiency of the company’s global distribution system at a much lower shipping and logistic cost (Ross 706). Conclusion and Recommendations There is technically nothing wrong with Cadbury’s existing global and domestic distribution strategies. Given the fact that Cadbury’s product lines are sensitive to high temperature, its global distribution manager should see to it that these products would reach its target consumers within the shortest possible time. In general, global distribution network can either be done direct channels or through the use of foreign intermediaries. As such, the global distribution manager should know the advantages and limitations of these choices. For instance, the use of direct channels can be more cost efficient on the part of Cadbury. However, this option does not free the company from any foreign trade barriers. Since foreign trade barriers can cause unnecessary delay in Cadbury’s product distribution, this company has decided to make use of foreign intermediaries. To establish a strong and reliable global distribution network, it is highly recommended that each global distribution manager should conduct their own studies concerning all trade barriers the company could encounter upon entering a foreign market. By doing so, the global distribution manager can easily come up with more effective solutions that will help the company avoid facing unnecessary problems caused by legal, social, cultural, and political issues in other countries worldwide. Likewise, this study highly recommends that each global distribution manager should carefully analyze the geographical locations of Cadbury’s main manufacturing plant in relation to its target global markets. As a common rule, Cadbury’s main manufacturing plant nearest to the target global market should be the one to manufacture and schedule the delivery of its finished food products. By doing so, the global distribution manager can effectively cut down unnecessary shipping and warehousing costs. 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International Journal of Information Systems and Supply Chain Management 1.1 (2008): 80-86. Print. Read More